Baofeng Sets Up Smart TV Brand To Take On Xiaomi and LeTV

China’s online video service Baofeng has established a joint venture with domestic animation company Alpha Animation and Culture, consumer electronics manufacturer 3Nod and Ririshun, the logistics arm of home appliance giant Hair, to develop a homegrown Smart TV brand Baofeng TV.

The joint venture will mean the acquisition of Haier’s smart TV affiliate Tongshuai Chuangzhijia. Under the deal, Baofeng will become the largest shareholder of Tongshuai Chuangzhijia by acquiring a 50% stake in the company for 250 million RMB ($40 million USD). Ririshun and Alpha Animation will respectively hold 21% and 10% in the firm, while the rest will be owned by the management team.

Baofeng was once a dominate video company in China, but as the market grew increasingly competitive, it transformed into a streaming portal for the likes of Youku Tudou and iQiyi, who are gaining momentum by investing heavily in copyrighted and user-generated content.

While the shift helped Baofeng avoid direct competition with the hefty players, it also created a questionable business model that is highly reliant on advertising. Currently ads account for more than 99% of the company’s revenue. In addition to the current foray into smart TV sector, the newly-listed company has launched a virtual reality headset this March in an attempt to find a new growth point.

This tie-up is also of strategic importance for Haier, as its major rivals Hisense, Skyworth and TCL have all tapped the smart TV sector.

The combined forces of Baofeng’s huge user base – over 50 million daily active users – 3Nod’s video technologies and Alpha Animation’s copyrighted content, will allow Baofeng TV to stand out in a competitive market, according to Feng Xin, CEO of Baofeng. Ririshun’s extensive retail and logistics chains in third and fourth-tier cities will help them tap into a more diverse spread of consumers

This new joint venture will intensify the already heated batted over China’s smart TV market between Xiaomi and LeTV. Feng Xin, CEO of Baofeng, acknowledged that the operation model of Baofeng TV will be similar to Xiaomi’s with heavy future investment in content.